Rickenbacker might face new rival in Wilmington

With all the headlines about airline flight cuts and new baggage fees, one might have overlooked the news out of an air-cargo hub in rural southwestern Ohio.

But for the city of Wilmington and 8,000 workers, in fact for the state, a proposed deal between UPS and the parent company of cargo carrier DHL could have a far more devastating effect than trimmed passenger service.

With all the headlines about airline flight cuts and new baggage fees, one might have overlooked the news out of an air-cargo hub in rural southwestern Ohio.

But for the city of Wilmington and 8,000 workers, in fact for the state, a proposed deal between UPS and the parent company of cargo carrier DHL could have a far more devastating effect than trimmed passenger service.

Nearly two months ago, DHL announced a plan to hire UPS as its air-cargo carrier in the United States, replacing ABX Air, which operates DHL's air-freight hub in Wilmington.

At stake are 8,000 jobs in a state that's already reeling from thousands of layoffs this year. The move could also put Wilmington Air Park, a former Air Force base that's been a privately owned air-cargo hub for 30 years, in competition with other regional airports, including Rickenbacker in Columbus, for cargo and possibly even passenger service.

The region has been stung before by changes and consolidation in the cargo business.

Just two years ago, Dayton lost 1,200 jobs after UPS acquired Emery and abandoned the Emery air-cargo facility at the Dayton airport. The Cincinnati-Northern Kentucky airport lost jobs when DHL acquired Airborne Express and consolidated to Wilmington.

With Wilmington apparently about to lose so much, officials there are expected to make a play for whatever business they can get. The question in the mind of a central Ohio airport official is whether there's enough business to go around.

"It's an incredibly challenging environment for both passenger and cargo service right now," said David Whitaker, who leads business-development efforts for Port Columbus and Rickenbacker.

"If they were to get, say, an international flight there based on their location between three population centers, it would be a gain for the state, no question. We, however, are employed to bring flights into our own airports. It will be difficult on either front. We definitely understand their situation and wish them well."

Iftikhar Ahmad, director of Dayton International Airport, echoed that sentiment. "In this atmosphere, it's tough even for established airports to keep service," Ahmad said. "But I feel for them, and they should do what they think is best for their community."

Any way one looks at it, in the short term, Wilmington is between a rock and a hard place if DHL leaves. The air shipper and its predecessor companies, such as Airborne Express, have for years had their largest U.S. hub in the town of 12,000 people 60 miles southwest of Columbus.

Wilmington processes billions of pounds of cargo each year and employs close to 10,000 people (a little more than 1,000 of those are involved with ground-shipping operations rather than air cargo, and are expected to be able to keep their jobs). It draws workers from more than two dozen counties; in six of those, it's the largest employer.

DHL's North American operations have been losing hundreds of millions of dollars a year, but no one ever expected to completely lose the air hub.

DHL's German parent company, Deutsche Post World Net, stunned the community in late May when it announced a deal that would shift its U.S. air shipments to UPS, which has a major hub in Louisville, Ky.

"The potential job loss is enormous," said Lt. Gov. Lee Fisher, who's also the state's economic-development chief. Fisher and Gov. Ted Strickland have joined Wilmington Mayor David Raizk in asking Deutsche Post to reconsider its decision to pull its air hub out of Wilmington.

"At this point, they have indicated that they will not reconsider," Fisher said. "That leaves us with no option but to try to stop the transaction with UPS. We've asked the (Ohio) attorney general's office to look into that. But we're also operating on a parallel track, looking at what the opportunity is if the transaction goes forward."

If the deal goes through, the best that Wilmington can hope for is that DHL hands its privately owned Wilmington Air Park to the community for redevelopment. But a nearly vacant airport is the last thing many small towns want.

Raizk has faith in the long-term prospects for Wilmington but doesn't try to disguise the huge pain that would be inflicted by DHL moving its air-cargo hub. "This is going to be a terrible blow, that's for sure," Raizk said.

The company that would lose the largest number of jobs in this scenario is ABX Air, which, along with ASTAR Air Cargo, works on behalf of DHL in Wilmington. ABX flies and services the nearly 100 aircraft involved in its operation.

ABX President John Graber said his company will be OK in terms of revenue, even if the business is lost. DHL is a high-volume but low-margin customer, he said, and DHL is contractually obligated to buy aircraft that will be put out of service by the new deal.

But, he said, the departure of DHL work would mean severe pain for the community and most of his workers and could drive ABX's remaining flight and maintenance operations elsewhere.

"If we're successful at 100 percent of what we intend to do if DHL leaves, we'll only be a shadow of our former selves," Graber said. "We can't stave off the disaster that is coming if we can't change DHL's mind."

Wilmington's airport itself is an impressive facility, having received about $1 billion in investment over the years. It lacks a terminal but has two large runways and a radar station that allows for operations in all but the most-severe weather conditions.

Still, it's a tough time to inherit an airport.

Even Ohio's major airports have been suffering as a result of drops in passenger service, many announced just in recent weeks. Cargo shipments were down about 12 percent last year at Rickenbacker, and it's been hard for Rickenbacker to maintain consistent passenger service. Other airports in the region have gone begging for added cargo business.

"I find it hard to believe that a smaller airport like that would be able to develop service," said Nawal Taneja, who leads Ohio State University's aviation department and is an air-service author and consultant. "The airlines are trying to regroup in light of fuel prices, and some of us believe fuel costs are actually going to go much higher."

Mike Boyd, head of Colorado-based industry consultancy the Boyd Group, is blunt in his assessment of Wilmington's situation.

"Dayton has an empty cargo facility. Cincinnati has empty cargo space. The last thing that region can support is another cargo operation," Boyd said.

Boyd cautioned that investing in such a facility can be expensive.

"Mid-America airport in St. Louis was an Air Force base, and that's been a disaster," Boyd said. "They tried for passenger service; now they're trying to be a big international cargo hub. They've spent $200 million supporting it. … Someone in Wilmington will probably come along with a $50,000 study, some clown study, and say this is a great idea. I'll tell you right now, for free: It's not going to work."